Investors started the week focused on earnings, and Alcoa kicked things off with a thud: The aluminum maker, which is slashing 15,000 jobs, reported a loss of $1.19 billionand a 19-percent drop in sales, falling well short of expectations.

Meanwhile, Citigroup shares wavered after an earlier dive amid concerns over its earnings and its plans to shed its brokerage unitas part of a deal with Morgan Stanley. Barring any last-minute glitches, a deal is expected to be announced after the bell today. Investors had been dumping Citi shares since Monday amid concerns that the Morgan Stanley deal won't fix the bank's capital needs.

Analysts expect this could be the quarter when banks post their first collective loss since 1990.

JPMorgan bumped up its earnings, which are now due out Thursday; analysts expect earnings of 2 cents a share, according to Thomson Financial.

General Electric shares tumbled after an analyst said the conglomerate's profit may be relying more heavily on tax benefits that Wall Street expects. Barclays analyst Robert Cornell said as much as 20 cents of GE's profit, expected to be in the 36 to 42-cent-per-share range, could come from tax benefits.

Pfizer shares ticked higher following a report in the Wall Street Journal that the pharmaceutical giant plans to lay off 800 researchers.

In economic news, the trade deficit shrank nearly 29 percentin November, the biggest contraction in 12 years, as weak consumer demand and plummeting oil prices caused a record drop in imports, the Commerce Department reported.

Meanwhile, the market got a boost from President-elect Obama's request for Congress to release the remaining $350 billion TARP funds, and from Fed Chairman Ben Bernanke's comment that the government will have to do more to backstop banks.

Meanwhile the Bernard Madoff scandal continued to reverberate across the globe, with Spain investigating Banco Santander's loss of more than $2.9 billion of its clients' money, the Wall Street Journal reported.